ECONOMIC AND FINANCIAL COLLAPSE

Economic and Financial Collapse

Economic and Financial Collapse

The financial crisis of 2007-2010 was caused by a lack of liquidity in the U.S. banking system. It has resulted in the collapse of major financial institutions, bank bailouts by national governments, and the contraction of stock markets around the world. In many areas, the housing market has also suffered, resulting in many evictions, seizures and prolonged vacancies. It is considered by many economists as the worst financial crisis since the Great Depression of the 1930's. contributed to the failure of key enterprises, the decline in consumer wealth estimated in the billions of U.S. dollars, major financial commitments by governments, and a significant decrease in economic activity. Many reasons have been suggested, with varying weight assigned by experts solutions. Both based on the market and regulators have implemented or are under consideration, while the risks remain significant for the global economy over the period 2010-2011.

The continuing decline in interest rates supported by the U. S Federal Reserve from 1982 onwards and large inflows of foreign funds created easy credit conditions for a number of years before the crisis, fueling a housing boom and encourage debt-financed consumption. The combination of easy credit and monetary input provided by the U.S. housing bubble. Loans of various types (eg, mortgages, credit cards, and car) were readily available and consumers is an unprecedented debt burden. As part of the housing boom and credit, the number of financial arrangements known as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), which derive their value from mortgage payments and prices housing, increases significantly. This innovation allowed financial institutions and investors around the world to invest in the U.S. housing market. As housing prices fell, the leading global financial institutions that have borrowed and invested heavily in subprime MBS reported significant losses. fall in prices also resulted in houses worth less than the mortgage, providing a financial incentive to enter foreclosure. The epidemic of foreclosures in progress that began in late 2006 in the U.S. continues to drain the wealth of consumers and weaken the financial strength of banking institutions. Defaults and losses on other loans also increased significantly as the crisis spread from the housing market to other parts of the economy. Total losses are estimated at billions of U.S. dollars worldwide .

U.S. President Barack Obama and key advisers made a number of policy proposals in June 2009. The direction of consumer protection proposals, executive pay, cushions or bank capital requirements, expansion of the regulation of the shadow banking system and its derivatives, and the highest authority of the Federal Reserve, to close restraint down systemically important institutions, among others. In January 2010, Obama proposed additional regulations that limit banks' ability to perform on their own. The proposals were known as "The Rule of Volcker," in recognition of Paul Volcker, who had publicly defended the proposed changes.

The U.S. Senateapproved a draft regulatory reform bill in May 2010, after the House passed a bill in December ...